Does the massive tax loss claimed by Donald J. Trump 20 years ago point to some sort of loophole widely exploited by wealthy New Yorkers on their state and city taxes?

That seems to be one of the intended take-aways from Jim Dwyer’s column in today’s New York Times. But Dwyer reads too much into some data from the city’s Independent Budget Office.

The column set-up is a comparison of Trump to Gomez Addams, patriarch of the fictional Addams Family, who in one episode of the original TV series is complimented by his wife for his superior ability to lose money. Dwyer writes:

Gomez and his household would have been New York taxpayers, since the Addamses [of the original New Yorker cartoon] lived in a spooky mansion that had been in the family for 200 years and was built somewhere in Central Park.

Though his tax returns probably weren’t part of the series, you can safely guess he had enough in losses to join the elite group of New Yorkers who make plenty of money but don’t pay income taxes on it. That group might very well include Donald J. Trump, the Republican nominee for president.

The most recent records show that 32,000 households with businesses in the city reported “negative income” for 2013, according to Michael Jacobs, supervising analyst for economics and taxes with the city’s Independent Budget Office.

That is, they declared their taxable income from all sources — businesses, salaries, interest—to be less than zero. Of that group, 24,300 households also reported $904 million in capital gains. Not a penny of those capital gains were taxed by the city or state, thanks to the offsetting losses.

[snip]

“Mr. Trump has lots of company—many other New Yorkers with millions in salaries, dividends and capital gains are not paying any New York City income taxes,” said James Parrott, chief economist of the Fiscal Policy Institute, a think tank in New York.

That reference to “not a penny” of tax having been paid on nearly $1 billion in capital gains no doubt set some antennae quivering among Albany’s tax-and-spenders, and Parrott’s quote underscores the notion that New York law is allowing lots of wealthy people to routinely avoid paying taxes. The column goes on to note that the “political treasuries of both parties in the New York State Legislature are packed with real estate money,” strengthening the implication that tax deductions for business losses are tailor-made for developers.

OK, time to get a grip.

First, although the column doesn’t say so, the figures cited are for taxpayers with negative adjusted gross income (AGI), as opposed to negative taxable income. The latter is a much larger universe of people including the working poor.

Your AGI can be a negative number if, on the face of your tax return, you can more than offset total income with net losses from business, work, rental property, theft, “casualties” (such as fire damage), or moving expenses. You can also deduct losses from farm businesses, along with net capital losses (e.g., stock you sold for less than you paid for it, a category that swelled in the years following the 2008-09 stock market meltdown). And, last but not least, a more complex array of “other losses” is defined in this IRS form. These losses can be “carried forward” and deducted from income on your annual returns for up to 20 years after they first are claimed, and also “carried back” to offset income up to two years in the past.

And now for some arithmetic: if you’ve got 24,300 New York-based filers claiming total capital gains of $904 million, as cited in Dwyer’s column, you’re talking about a modest average gain of $37,202.

Some additional numbers from IBO round out the picture: among those 32,000 New York City filers with negative AGIs due to business net operating losses (as reported on lines 6, 8 and 11 of this form), the total reported loss came to $3.277 billion, which works out to an average of $102,300.

If your positive AGI can be wiped out by a loss in the low six figures, you are not exactly a plutocrat.

So, what sort of people typically can offset income with a net operating loss? The data don’t actually tell us, but Bloomberg News columnist Megan McArdle does an excellent job of explaining how this part of the tax code actually works:

Take a simple example, offered to me by Joe Kristan, a CPA who writes one of my favorite tax blogs. A meatpacking business loses a million dollars in one year, and then the next year it makes a million and a half. Without the ability to carry forward the losses from year one, then over the two years, it would pay perhaps $600,000 worth of state and federal income taxes, on $500,000 worth of actual money that it could spend to pay those taxes.

And did this scenario correspond to real-world clients of his firm? Absolutely, [the CPA] said; it’s common in commodity businesses, where prices can fluctuate wildly from year to year.

“If someone has a $20 million gain in one year and a $10 million loss in the second year, that person should be treated the same as someone who had $5 million in each of the two years,” says Alan Viard, a tax specialist at the American Enterprise Institute, who like all the other experts, seemed somewhat surprised that this was not obvious.

“There are definitely tax provisions narrowly targeted to various industries that you could take issue with,” says Ron Kovacev, a tax partner at Steptoe and Johnson. “The NOL is not one of them.”

This all started with the Times’ disclosure that Trump’s 1995 federal tax returns reported a net loss of close to $916 million, which “could have allowed him to legally avoid paying any federal income taxes for up to 18 years.” Of course, as McArdle writes, “it is not actually smart financial strategy to lose $900 million in order to get out of paying $315 million to the IRS.”

Meanwhile, Trump speculations aside, the highest-income New Yorkers as a group generate a disproportionately large share of New York State tax revenues.

PS — This Josh Barro piece at Business Insider explains the very complicated loophole—now closed—that Trump may have exploited to claim such an enormous loss.